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US government probes Apollo Group, owner of BPP University College, over admissions and financial aid practices
The company running one of only two for-profit universities in Britain is under investigation for deceiving students following an undercover operation by the US government.
Universities minister David Willetts awarded BPP University College its university status last year as part of a government drive to increase the number of private companies in further education.
Last week the government also announced plans to double the tuition fee loans available to students attending private universities, in an effort to encourage more companies to enter the education market. But the government's policy has been plunged into controversy after it emerged that Apollo Group, the American owner of the new university, is under investigation by US authorities over its "recruiting, admissions and financial aid practices".
The US Higher Learning Commission (HLC) launched its inquiry after it found evidence that Apollo had deceived prospective students during enrolment. The investigation by the US Government Accountability Office found officials at the firm's US universities, which include the University of Phoenix, were offering applicants exaggerated accounts of the potential for their careers after graduation. Private universities in America and the UK are almost entirely reliant for their funding on tuition fees, often paid by students through government loans.
Apollo has been ordered to answer a series of questions over its practices by the end of this month. The development is just the latest scandal to beset the company, which had an appeal for a conviction for securities fraud turned down last month; the company was found to have withheld a critical report from the US Department for Education from its shareholders. It has already paid around £8m to the government and is due to reimburse its investors around £130m.
Apollo Group's chief executive, Charles Edelstein, earns a $6m remuneration package, including bonuses and share options. The company's legal tangles will be an embarrassment for the British government, which is due to produce a white paper in which further encouragement for private universities is expected.
Willetts said earlier this year that one reason he wished to radically reduce state grants and deliver funding through loans was to level the playing field for private higher education providers. He said: "Currently, one of the main barriers to alternative providers is the teaching grant we pay to publicly funded higher education institutions [HEIs]. This enables HEIs to charge fees at a level that private providers could not match, and so gives publicly funded HEIs a significant advantage.
"Our funding reforms will remove this barrier, because all HEIs will – in future – receive most of their income from students via fees. This reform, of itself, opens up the system.
We will also allow alternative providers to access the generous system of student loans and grants, so their students will also be able to benefit from not having to pay upfront."
There are two private universities in England – Buckingham and BPP – with degree awarding powers. BPP, named after a UK company owned by Apollo, specialises in providing courses in law, banking and financial practice.
Concerns have already been raised that private universities will be in a position to "cherry pick" such lucrative degrees, for which high prices can be charged, while traditional universities continue to teach the full range of courses expected of them at a loss.
Shadow universities minister Gareth Thomas said he was concerned by the US developments and demanded Willetts slow down the pace of reform. "The government wouldn't need to be rushing to let more private providers into higher education if they hadn't got university finances into such a mess", he said.
Carl Lygo, chief executive of BPP, insisted his university was subject to a much higher degree of regulation than in America: "We are a degree awarding body which means we have a much tougher regulatory regime applied to us and a much different regime to that in the United States. I run the UK operation, BPP, which is entirely run by the UK team and has no direct control from the United States, and we are under the UK regulatory regime.
"At the time of the acquisition by Apollo, just less than two years ago, they undertook to accept that type of regulation would stay in place."
A spokesman for Apollo Group said: "We took the GAO's study very seriously and initiated an immediate internal investigation."
Guardian.co.uk
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